Report – Peugeot aims for 1 million cars locally produced in China

According to people familiar with the situation, PSA Peugeot Citroen is aiming to produce 1m cars a year in China for Asian markets with local automaker Dongfeng, as part of their industrial partnership.

Under current alliance proposals, Dongfeng and the French state will take a 14 % stake in Peugeot as part of an effort to raise €3 billion in capital. The struggling French automaker, hit by the worst European car market for two decades and bleeding cash, will use the money to invest in new models and shore up its balance sheet.

The joint venture will produce cars under Peugeot, Citroen and Fengshen brands, using common platforms and supply chains, and sharing research and development costs.
Peugeot and Dongfeng plan to increase car sales into China and Southeast Asian markets to 1 million cars a year in the next three to four years. Total PSA group sales in 2012 were 3 million units.

One area of potential R&D collaboration will be over the Hybrid Air, a complex technology to reduce fuel consumption. Peugeot also hopes to receive a stream of revenue from sharing its technology with the joint venture. Dongfeng, PSA and the French government are still in talks over the exact nature of the financial and industrial agreement.

Peugeot said last week the talks were in their final stages, confirmed the 3 billion euros capital increase, and said it would give more clarity when it released annual results on February 19.